Suppose the Federal Reserve increases deposits at financial institutions by $50 billion through its open market operations. If the reserve requirement for all deposits is 8%, what is the maximum impact the Fed's actions can have on total deposits? a. $575 billion increase b. $54.3 billion increase c. $625 billion increase d. An increase greater than $1 trillion e. Total deposits would decrease, but there is not enough information to compute the amount.
Suppose the Federal Reserve increases deposits at financial institutions by $50 billion through its open market operations. If the reserve requirement for all deposits is 8%, what is the maximum impact the Fed's actions can have on total deposits?
a. $575 billion increase
b. $54.3 billion increase
c. $625 billion increase
d. An increase greater than $1 trillion
e. Total deposits would decrease, but there is not enough information to compute the
amount.
Federal Reserve Requirement: Reserve requirements are imposed by the Federal Reserve on banks and other depository institutions, which must maintain a certain amount of reserves against their obligations. As of this writing, the marginal reserve requirement is equivalent to 10 percent of a bank's demand and checking deposits.
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